KARACHI: Sino-Sindh Resources Private Limited, a mining company working on block-I of Thar coalfield, has said that it has been able to resolve financing issues as the Industrial and Commercial Bank of China (ICBC) has agreed to fund a major chunk of the project.
“ICBC has issued a letter of interest for providing $1 billion in the form of a 10-year loan to help extract coal from block-I of Thar coalfield,” said Chaudhary Abdul Qayyum, Chief Executive Officer of Sino-Sindh Resources, while talking to a group of journalists.
“This covers 75% of the capital cost of phase one of the project while 25% will be equity, which will be raised by a consortium,” he said. “We hope that the financial close will be achieved in the second quarter of this year.”
Sino-Sindh Resources is a subsidiary of Global Mining (China), which has 55% shares. Asiapak Investments holds 40% shares and a Dubai-based company has a 5% stake.
The company has been allotted Thar coalfield’s block-I, which is spread over 150 square kilometres, out of the total area of 9,000 square kilometres.
It is expected to start coal extraction soon after achieving the financial close. Initially, 6.5 million tons of coal will be produced per annum from the block, which has estimated reserves of 2.5 billion tons. This coal production will be enough to run four power plants of 350 megawatts each.
Coal extraction could be scaled up to 20 million tons per annum for its sale to other power plants or export to foreign markets.
“On achieving successful financial close, commercial production of coal is expected to begin by the first quarter of 2018,” Qayyum said. “This coal is perfect for mine-mouth power plants, which will generate electricity at around 40% lower price compared to furnace oil.”
The second and the most important phase is the production of 1,400MW – four plants of 350MW each – at the mouth of the mine and an estimated $2 billion capital will be required.
Qayyum voiced hope that finances would not be a hurdle as the project will be executed by Shanghai Electric Corporation under the China-Pakistan Economic Corridor.
“This will be the best use of coal; it will eliminate transportation cost, which could increase coal price up to $27 per ton. For mine-mouth power plants, a 2-2.5km conveyor belt will be required to transport coal from the mine to the power plants,” he said.
As the mine achieves economies of scale and debt is paid off, the unit cost of coal will continue to decline, stabilising at $3.73 per million British thermal units from the 11th year. The levelised cost for block-I is $5.71 per mmbtu.
The cost of electricity for the initial 10 years will be 8.5 cents per unit and when the loan period ends, the cost will come down to 6 cents per unit.